TMI Blog1995 (1) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned herein with the taxes mentioned under Clauses (a), (b) and (c), viz., (a) a tax on holdings situated within Patna assessed on their letting value; (b) a water tax assessed on the annual letting value of holdings; and (c) a latrine fax assessed on the annual letting value of holdings . Section 124 prescribes the ceiling beyond which the tax on holdings shall not be imposed. The ceiling prescribed is twelve and a half per cent of the annual value of the holdings. Section 130 defines the expression annual value of holdings occurring in Sub-section (1) of Section 124. Sub-section (1) of Section 130 says that save as may be prescribed by the rules made by the State Government, the annual value of a holding shall be deemed to be the gross annual rental at which the holding may reasonably be expected to let ., Sub-section (2) deals with a situation where there is a building or buildings on a holding and the actual cost of erection of the same can be ascertained and which building(s) is not intended for letting or for the residence of the. owner himself, the annual value of such holding shall be deemed to be an amount which may, subject to the rules made by the Government, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contentions arising herein. 4. Rule 2(b) defines annual rental value to mean the rent that a holding is capable of fetching over a period of one year. Clauses (d) and (e) of Rule 2 define the expression commercial holding' and 'industrial holding' respectively. Rule 3, which is the rule most relevant for our purposes, provides for classification of holdings. It reads as follows: 3. Classification of holding-(1) The holding in the Corporation area shall be classified by the Corporation on the following criteria: (a) Situation of the holding: (i) Holdings on the Principal Main Road. (ii) Holdings on the Main Road. (iii) Holdings other than Sub-clauses (i) and (ii). (b) Use of the Holding: (i) Purely residential; (ii) Purely commercial or industrial (whether self owned or otherwise); (iii) Partly residential and partly commercial/industrial; (iv) All holdings other than Sub-clauses (i), (ii) and (iii). (c) Type of construction: (i) Pucca building with R.C.C. roof. (ii) Pucca building with asbestos/corrugated sheet roof. (iii) All other buildings not covered in Sub-clauses (i) and (ii), 2. Subject to the approval of the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building used for residential purpose and situated on a principal main road is fixed at ₹ 18/- per sq.ft., for a building meant for commercial use situated on a principal main road, the annual rental value is ₹ 54/- per sq.ft.; the rental value of a residential building situated on a main road is fixed at ₹ 12/- per sq.ft. and that of a commercial building on a main road at ₹ 36/- per sq.ft.; the rental value of residential buildings on roads other than principal main roads and main roads is fixed at ₹ 6/- per sq.ft and that of a commercial buildings at ₹ 18/- per sq.ft. 8. Several contentions were urged by the writ petitioners (respondents in this appeal) before the High Court, some of which were rejected by the High Court and some relegated to appeal and other remedies provided by the Act. The court confined its attention only to the validity of the Assessment Rules, 1993. The grounds which appealed to the High Court and on the basis of which Clauses (a) and (c) of Sub-rule (1) were struck down, may best be set out in the words of the High Court itself: It appears to me that the impugned Assessment Rules were well intended and contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... road like Ashok Raj path can only be headed properly by dividing the city into different zones. However, as the relevant provisions contained in Rules 3(1)(a) and (c) stand at present I have no option but to hold and declare that these infringe Article 14 of the Constitution and are ultra vires Section 123 and 130 of the Patna Municipality Corporation Act. 9. The High Court then took up the two notifications and found that they are equally indicative of the slip shod manner in which the scheme is sought to be implemented . The High Court held that so far as the notification issued under Rule 5(1) is concerned, the counter-affidavit does not disclose the objective materials that went into consideration for determining the rates . It then referred to the property owned by the respondents which was said to have been let out on a monthly rental of ₹ 1,200/- (annual rent of ₹ 14,400/-) whereas its annual rental value as per the impugned notifications would be ₹ 1,55,520/-*. The High Court observed that this fact shows the enormous burden placed upon certain house-owners. Dealing with the notification issued under Rule 3, the High Court observed that the classi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... always heavy and heavier still when a taxing statute is under attack...the burden is on a person complaining of discrimination. The burden is proving not possible 'inequality' but hostile unequal' treatment. This is more so when uniform taxes are levied. 12. In R.K. Garg v. Union of India (1982 (1) S.C.R. 947), Bhagwati, J., speaking for the Constitution Bench, made the following oft-quoted observations: Now while considering the constitutional validity of a statute said to be violative of Article 14, it is necessary to bear in mind certain well established principles which have been evolved by the courts as rules of guidance in discharge of its constitutional function of judicial review. The first rule is that there is always a presumption in favour of the constitutionality of a statute and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles.... Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sibilities of abuse of any of its provisions. If any crudities, inequities or possibilities of abuse come to light, the legislature can always step in and enact suitable amendatory legislation. That is the essence of pragmatic approach which must guide and inspite the legislature in dealing with complex economic issues. 13. To the same effect are the observations of a Division Bench in State of Maharashtra v. M.B. Badiya (1988 Suppl. (2) SCR 482) wherein Sabyasachi Mukharji, J. observed: About discrimination it is well to remember that a taxation law cannot claim immunity from the equality clause in Article 14 of the Constitution. But in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion and latitude in the matter of classification for taxation purpose is permissible. See the observations of this Court in Income Tax Officer, Shillong and Anr. etc. v. N. Takim Roy Rymbai etc. etc. (supra). Also see the observation in Mrs. Meenakshi and Ors v. State of Karnataka (supra); Anant Mills Co. Ltd. v. State of Gujarat and Ors. (supra) and Khandige Sham Bhat and Ors. v. The Agricultural Income-tax Officer. (supra). 14. We may also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that reason, the classification has been held to be inadequate and incomplete. The question is whether the absence of further classification on the basis suggested makes the classification made by the Rule discriminatory and offensive to Article 14? We think not. This was precisely the argument which was dealt with and rejected in Twyford Tea Company Limited. The contention was that the Act impugned therein provided for a uniform rate of tax per hectare which every owner of a named plantation has to pay irrespective of the extent or value of the produce and therefore the law imposes a uniform tax burden on unequals . Repelling the argument, Hidayatullah, C.J., speaking for the majority, stressed that in such cases the burden is proving not possible 'inequality' but hostile s unequal' treatment. This is more so when uniform taxes are levied. It is not proved to us how the different plantations can be said to be hostilely or unequally treated. A uniform wheel tax on cars does not take into account the value of the car, the mileage it runs, or in the case of taxis, the profits it makes and the miles per gallon it delivers. An Ambassador taxi and a Fiat taxi gives di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates applicable . It would also run counter to the entire reasoning of this Court in R.K. Garg in the passages quoted above. Similarly, the other objection that the municipal corporation area ought to have been divided on the basis of zones and not on the basis of the roads is also not a ground upon which the court could have invalidated the rule. It is not pointed out that the division with reference to roads amounts to hostile treatment. In case of such classification, there will always be some instances where one gets an advantage and the other suffers a disadvantage but that is no ground, as has been repeatedly emphasised by this Court in the decision referred to above for invalidating a statute and more particularly a taxing statute. The merit of the Assessment Rules, 1993, as emphasised by the High Court at more than one place, is that they rid the house-owners of the harassment and the constant threats of revision of annual rental value by the concerned officials of the corporation. The earlier system of taxation left too much discretion in their hands. Now, the only thing that has to be ascertained is the carpet area of the house, the rest is determined by the Rules and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the Legislature should have adopted another method which, in the opinion of the Court, is more reasonable, unless it is convinced that the method adopted is capricious, fanciful, arbitrary or clearly unjust. 18. Reference may also be had to the recent decision of this Court in P.M. Ashwathanarayana Setty v. State of Karnataka (1989 Suppl. (1) 696), where Venkatachaliah, J., speaking for the court made the following pertinent observations: The lack of perfection in a legislative measure does not necessarily imply its unconstitutionality. It is rightly said that no economic measure has yet been devised which is free from all discriminatory impact and that in such a complex arena in which no perfect alternatives exist, the court does well not to impose too rigorous fiscal services. In G.K. Krishnan v. State of Tamil Nadu , this Court referred to, with, approval, the majority view in San Antonio Independent School District v. Rodriquez (39 L.ed. 2d. 16) speaking through Justice Stewart: No scheme of taxation, whether the tax is imposed on property, income or purchases of goods and services, has yet been devised which is free of all discriminatory impact. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the respondents-writ petitioners that this low rent is because of the applicability of the Rent Control Act and the fixation of fair rent. But for the applicability of the Rent Control Act and fixation of fair rent thereunder, it is difficult to believe-the respondents' case that a property of the above nature and dimensions would fetch such a low rent. According to the impugned rules and notifications, its annual rental value is determined at ₹ 1,55,520/- (annual tax of ₹ 13,996.80p. at the rate of nine per cent) which in the circumstances cannot be said to be either excessive or unreasonably high. We have dealt with this particular instance because the High Court has made it a ground for invalidating the notifications and not for any other reason. 21. Sri Muralidhar, learned Counsel for the respondents submitted that rules and the notifications do not take into account buildings which arc covered by the Rent Control Act and that where the said Act applies, the rent cannot be enhanced except to a limited extent provided by the Act and that in such cases the said rules and notifications operate with undue harshness. But no such argument was addressed befo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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